U.S. retail sales in February rebounded less than forecast, indicating a potential slowdown in consumer spending amid inflation and borrowing cost hikes. Despite this, the Federal Reserve is unlikely to adjust interest rates before June, especially as producer prices surged more than expected last month.
The labor market remains robust, with fewer Americans filing for unemployment benefits. Additionally, revisions to weekly claims data show laid-off workers quickly finding new jobs, suggesting a shorter duration of unemployment benefits.
Retail sales rose by 0.6% in February, though January’s figures were revised downward. The increase was mainly driven by higher receipts at motor vehicle dealerships and gasoline stations, reflecting increased prices at the pump. However, online sales dipped, and there were declines in sales at clothing, health, and personal care stores.
Food services and drinking places saw a modest rebound in sales after a drop in January, indicating continued consumer caution amidst rising prices. Core retail sales, excluding automobiles, gasoline, building materials, and food services, remained unchanged in February, aligning closely with consumer spending trends.
While the Atlanta Fed trimmed its first-quarter GDP growth estimate to 2.3%, down from 2.5%, stocks on Wall Street reacted negatively to the news. The dollar strengthened against other currencies, while U.S. Treasury prices declined.
Separately, initial claims for state unemployment benefits fell slightly, with fewer Americans seeking aid. However, the number of people receiving benefits after the initial week increased, suggesting a mixed picture of the labor market’s health.
The Federal Communications Commission is investigating potential security threats posed by the use of Russian and Chinese satellite systems in U.S. mobile phones and devices, highlighting ongoing concerns about national security.
Despite signs of economic slowdown, analysts expect the Fed to start reducing interest rates in June, contingent on further inflation data.
